Good idea … it got me to start over from scratch and here is what I have:

Menus/Subtitles in English
Voices in German

I am not sure what I did wrong at first but just starting over worked.
I uninstalled Gothic III then installed German (I ACCEPT and NEXT HA!).
Installed the CP1.7 which detected German. Installed QuestPak 3 and hotfix.
Then changed ge3.ini from German->English as:

I have found a few quests in the Humanforce's mod that do not have subtitles, however a large number of them do have English subtitles. Surprising as the quest pak is only officially released in German so far.